Tag Archives: innovation

Which way to the future?

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I’ve enjoyed reading Bernard Carlson’s [amazon_link id=”0691165610″ target=”_blank” ]Tesla: Inventor of the Electrical Age[/amazon_link] (although, as I confessed, skipping over the physics). How exhilarating to read about the exceitement as thousands of people crammed into lecture halls to hear Tesla speak about his discoveries. “The demand for seats was so great that tickets were being scalped outside the hall for three to five dollars,” Carlson writes of an 1893 lecture in St Louis (that’s $80-130 in today’s dollars).

[amazon_image id=”0691165610″ link=”true” target=”_blank” size=”medium” ]Tesla: Inventor of the Electrical Age[/amazon_image]

The book is particularly interesting on the lack of form and direction in the early stages of commercial development of a new technology. Standards had not been agreed. Different technical approaches seemed equally viable. Companies were forming – and going into receivership – and the investment risk was substantial. Rich investors (hello J.P.Morgan) were trying to corner new markets. Patent litigation was common.Tough choices had to be made between promoting ideas and licensing the patents versus holding patents and going into manufacturing.

In this confusion, sober analysis was insufficient to make technical and financial choices. What Carlson calls ‘illusion’, the building of sufficient belief in a single path to the future, was critical: “We need to understand and appreciate how inventors and entrepreneurs forge relationships that foster a balance between imagination and analysis.” The inventor has to inspire his (or her) backer, the businessman has to keep the creative genius grounded (no pun intended). One could see it as creating the focal point in a game with many possible outcomes, and hence sometimes the phenomenon of [amazon_link id=”0141031638″ target=”_blank” ]lock-in[/amazon_link] to what might be not the best technical outcome.

So, a fascinating read on the early development of an important new technology, as well as an extraordinary character. As the book observes, there was always a kind of minority interest in Tesla, a real maverick; but he deserves this fine biography.

Inventors and manufacturers, and their economics (Version 1.0)

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Courtesy of Anton Howes (his economic history blog is here) and Marc Andreessen, here are other works of political economy written by 19th century people who could and did make things. There is obviously a rich vein of literature to revisit here. This post is now updated with better links, also courtesy of Anton.

Here is his list, with his comments and a few notes from me.

“The one that immediately sprang to mind was the chemist Andrew Ure (1778-1857) and his [amazon_link id=”5519176558″ target=”_blank” ]The Philosophy of Manufactures[/amazon_link] (1835). (Free online copy.) I believe he had other works on political economy too.

[amazon_image id=”5519176558″ link=”true” target=”_blank” size=”medium” ]The Philosophy of Manufactures[/amazon_image]

My note: Here’s another, [amazon_link id=”1231159510″ target=”_blank” ]The Cotton Manufacture of Great Britain[/amazon_link]:

[amazon_image id=”1231159510″ link=”true” target=”_blank” size=”medium” ]The cotton manufacture of Great Britain systematically investigated Volume 1; with an introductory view of its comparative state in foreign countries[/amazon_image]

And a free online copy.

[amazon_link id=”1170437060″ target=”_blank” ]James Anderson[/amazon_link] (1739-1808) had quite a few writings on political economy, apparently anticipating Ricardo. Here is Observations on the means of exciting national industry. My note:  this article says he critiqued Adam Smith.

John Marshall (1765-1845), the flax spinning pioneer, wrote a book called The Economy of Social Life in 1825. I’m not sure if it’s on political economy, but he certainly lectured on the topic later on in life.

[amazon_link id=”1171962851″ target=”_blank” ]John Sinclair[/amazon_link] (1754-1835), the agricultural pioneer and writer, had quite a few works touching on political economy and the national finances. He was apparently a notorious bore offering unsolicited advice on the latter topic in particular. Here is his History of the Public Revenue of the British Empire.  [amazon_link id=”1438505582″ target=”_blank” ]Arthur Young [/amazon_link](1741-1820) may have similar works, but was a little more focused on just agriculture.

[amazon_image id=”1170437060″ link=”true” target=”_blank” size=”medium” ]Account of the origin of the Board of Agriculture, and its progress for three years after its establishment. By the president.[/amazon_image]  [amazon_image id=”B00A1V6SOA” link=”true” target=”_blank” size=”medium” ]An Account of the Systems of Husbandry Adopted in the More Improved Districts of Scotland: With Some Observations On the Improvements of Which They … Agriculture with a View of Explaining How F[/amazon_image]

[amazon_link id=”1152894218″ target=”_blank” ]Andrew Yarranton[/amazon_link] (1619-1684), the metallurgist and civil engineer, has quite an interesting work called “England’s Improvement by Land and Sea: how to Beat the Dutch without Fighting” (2 vols., 1677–81). Quite interesting, particularly for the time. Here is the free online copy.

[amazon_image id=”1152894218″ link=”true” target=”_blank” size=”medium” ]England’s Improvement by Sea and Land[/amazon_image]

John Chapman (1801-1854), the inventor of the cab, had quite a few well-known (at the time) works on the political economy of India. May well be considered one of the earlier development economists! Here’s The Cotton and Commerce of India.

The actuarial and navigational pioneer Francis Baily (1774-1844) had quite a few works on political economy. One that sticks out as sounding quite interesting is called “The Rights of the Stock Brokers Defended Against the Attacks of the City of London” (1806)

Another actuarial pioneer, Robert Wallace (1697-1771), was also very prolific writing about demography and political economy. One that sounds quite intriguing is called [amazon_link id=”1142321886″ target=”_blank” ]Dissertation on the Numbers of Mankind[/amazon_link] (1753). Here’s the free online version.

[amazon_image id=”1140998420″ link=”true” target=”_blank” size=”medium” ]A dissertation on the numbers of mankind in antient and modern times: in which the superior populousness of antiquity is maintained. With an appendix, … on Mr. Hume’s Political discourse, …[/amazon_image]

A lot of people also tend to overlook [amazon_link id=”1170181791″ target=”_blank” ]Richard Price[/amazon_link]’s (1723-1791) contributions to economics. They’ve been largely overshadowed by his radical political and theological works. But it was he who originally proposed and then advised on the National Debt sinking fund, as well being the person to promote Bayes’ work on statistics and probabilities. Here is Observations on the Debt.

[amazon_image id=”1170181791″ link=”true” target=”_blank” size=”medium” ]An appeal to the public, on the subject of the national debt. The second edition. With an appendix, … By Richard Price, D.D. F.R.S.[/amazon_image]

[amazon_image id=”B00FDVBZHI” link=”true” target=”_blank” size=”medium” ]Observations on Reversionary Payments: On Schemes for Providing Annuities for Widows, and for Persons in Old Age; On the Method of Calculating the Values of Assurances on Lives; And on the National Debt. Also, … a PostScript on the Population of the Kin (Paperback) – Common[/amazon_image]

You may also be interested in the works of William Cobbett (1763-1835). [Me: best known name on this list.] He’s on my list as an agricultural pioneer, but he’s better known as a political radical and for compiling what would later be better known as Hansard. In 1815 he wrote something called [amazon_link id=”1172783411″ target=”_blank” ]Paper against Gold[/amazon_link], (available here too) but there are many other works on economics and political economy.”

[amazon_image id=”1172783411″ link=”true” target=”_blank” size=”medium” ]Cobbett’s Paper against gold: containing the history and mystery of the Bank of England, the funds, the debt, the sinking fund, the bank stoppage, the … shewing, that taxation, pauperism, poverty,[/amazon_image]

Many thanks to Anton for those. And from Marc via Twitter (@pmarca), this one by David Wells, Recent Economic Changes and Their Effect on the Production and Distribution of Wealth and the Well-Being of Society.

Innovating for good

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Yesterday I read this Project Syndicate comment by Kermal Dervis arguing that the returns to publicly-funded R&D have been essentially privatised – a point also made by Mariana Mazzucato including in her new volume, Mission Oriented Finance for Innovation. The comment includes some interesting suggestions such as a publicly-owned venture fund, although Nesta’s Stian Westlake has pointed out that there are some problems with the broader argument. I’d add to his list the basic argument about the diseconomies of centralised decision-taking when you’re talking about ideas, something amply demonstrated by20th century experience.

In particular, Stian argues, and I completely agree, that it is both necessary and hard to account for the full social welfare effects of publicly-financed innovation – these go beyond the financial return. The discussion yesterday on Twitter sent me back to [amazon_link id=”0231152140″ target=”_blank” ]Creating a Learning Society[/amazon_link] by Joseph Stiglitz and Bruce Greenwald. This is a book I’ve yet to work through properly, and it’s quite a demanding tome. Looking today at the key chapters only underlines the challenge of thinking through social welfare – and therefore policy implications – of innovation in the modern economy. For starters, ‘knowledge’ has the characteristics of a public good and a natural monopoly. Innovation requires accounting for risk, in imperfect capital markets – and there’s pure uncertainty too. There are complicated dynamics, path dependence, and probably instability.

[amazon_image id=”B00NIC3A1I” link=”true” target=”_blank” size=”medium” ]Creating a Learning Society: A New Approach to Growth, Development, and Social Progress (Kenneth J. Arrow Lecture Series) by Stiglitz, Joseph E., Greenwald, Bruce C. (2014) Hardcover[/amazon_image]

It leaves me thinking (a) we’re a long way from being able to make definitive policy recommendations about how to boost innovation, although I’m sure it includes state as well as market activities. And (b) there’s a lot of work economists need to do on standard welfare economics, which has a dusty 1970s (or earlier) feel to it.

What would Galbraith think about Google?

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I’ve been grazing along the shelf of my old Penguin economics texts and stumbled on this quote from J.K.Galbraith’s (1952) [amazon_link id=”1560006749″ target=”_blank” ]American Capitalism: The Concept of Countervailing Power[/amazon_link] (in M.A.Utton’s [amazon_link id=”0140801723″ target=”_blank” ]Industrial Concentration[/amazon_link]): “The modern industry of a few large firms is an excellent instrument for  inducing technical change. It is admirably equipped for financing technical development and for putting it into use. The competition of the competitive world, by contras, almost completely precludes technical development.”

[amazon_image id=”B0010JYWD6″ link=”true” target=”_blank” size=”medium” ]American Capitalism[/amazon_image]  [amazon_image id=”0140801723″ link=”true” target=”_blank” size=”medium” ]Industrial Concentration (Modern Economic Texts)[/amazon_image]

Galbraith is talking complete nonsense, of course. As this little textbook points out in the next paragraph: “The supposed antithesis between price competition and innovation is false: they are different forms of the same competitive process. Innovation is competition.” Many is the oligopolistic industry that has failed to innovate. As Will Baumol pointed out in his book [amazon_link id=”069111630X” target=”_blank” ]The Free Market Innovation Machine[/amazon_link], big firms tend to do incremental innovation, while radical innovation tends to come from small entrants.

This is the heart of the competition debate about Google etc. Will some new entrant come along an torpedo it in the search market, or has it through its scale effectively foreclosed new entry? Critics of the EU competition authorities’ assault on Google (including this week Barack Obama – but listen here to Martha Lane-Fox demolish him) point to its continuing record of innovation; but from another perspective, that looks like it leveraging its scale advantages into new markets, something dominant firms always try to do. I’m with Tim Wu, whose fabulous book [amazon_link id=”1848879865″ target=”_blank” ]The Master Switch[/amazon_link] argues that the opportunity for new entrants to cause upheaval in technology and communication markets has always been created by a regulatory intervention.

[amazon_image id=”1848879865″ link=”true” target=”_blank” size=”medium” ]The Master Switch: The Rise and Fall of Information Empires[/amazon_image]   [amazon_image id=”069111630X” link=”true” target=”_blank” size=”medium” ]The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism[/amazon_image]

To be fair to Galbraith, this being one of his books I’ve not read, this summary suggests he was not relaxed about oligopoly power; however, he suggests the ‘countervailing power’ of organised labour is the way to control it. I’m all for workers having adequate bargaining power in the labour market but fail to see how that fixes a lack of competition in product markets. Google’s workers are very well treated. I wonder what Galbraith would make of these modern business titans?

Cities, innovation and complexity

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In re-reading (after many years) Jane Jacobs’ [amazon_link id=”039470584X” target=”_blank” ]The Economy of Cities[/amazon_link], I’m forcibly struck by the echoes between her work on urban diversity and the recent work on complexity by Ricardo Hausmann and Cesar Hidalgo in their [amazon_link id=”0262525429″ target=”_blank” ]Atlas of Economic Complexity[/amazon_link]. Although their focus is the national level, cities drive national economies (as Jacobs so convincingly argues). What she does so magnificently is describe the process at the more disaggregated level.

[amazon_image id=”B000TOPA52″ link=”true” target=”_blank” size=”medium” ](The Economy of Cities) BY (Jacobs, Jane) on 1970 (Paperback)[/amazon_image]   [amazon_image id=”0262525429″ link=”true” target=”_blank” size=”medium” ]The Atlas of Economic Complexity: Mapping Paths to Prosperity[/amazon_image]

Also striking is her argument about innovation as a process of branching out of new activities from old ones, in ever more intricate trees. The process is not driven by solving problems or meeting unsatisfied demands by consumers, she argues, but rather is producer-driven. “The new goods and service being added may be irrelevant to what customers of the older work want.” Or perhaps even detrimental to those customers. In one of her examples, Ida Rosenthal invented the brassiere, and in doing so abandoned the customers of her older dress-making business. Software developers are always annoying their customers, and we’ve got used to that, but I hadn’t really thought about the same phenomenon in other areas of the economy.

I also picked up recently a fabulous catalogue from a 2001 Tate Modern exhibition, [amazon_link id=”1854373447″ target=”_blank” ]Century City: Art and Culture in the Modern Metropolis[/amazon_link]. It has some great essays, including Sharon Zukin on ‘How to create a culture capital: reflections on urban markets and places’: “The business of cities today is to construct a place around culture markets….. A cultural quarter is very much like a regional industrial district.” The difference being that cultural districts have to bring their consumers to them rather than taking goods to the consumers, with consequences for the built environment and amenities.

[amazon_image id=”1854373447″ link=”true” target=”_blank” size=”medium” ]Century City: Art and Culture in the Modern Metropolis (Art Catalogue)[/amazon_image]

There’s a new urbanism exhibition at the Barbican that looks interesting: Constructing Worlds: Photography and Architecture in the Modern Age.

PS I forgot to mention a recent book, [amazon_link id=”0691157812″ target=”_blank” ]The Atlas of Cities[/amazon_link] edited by Paul Knox, a beautiful object as well as stuffed with fascinating material.

[amazon_image id=”0691157812″ link=”true” target=”_blank” size=”medium” ]Atlas of Cities[/amazon_image]